Big or Small, Profitable or Not: What Do Investors Really Respond To?
DOI:
https://doi.org/10.12928/jreksa.v12i1.13184Keywords:
profitability, company size, institutional ownership, investor emotionsAbstract
This study aims to understand what factors influence investor responses to companies. Using a mixed methods approach, it analyzes quantitative data from 50 companies listed on the Indonesia Stock Exchange and conducts qualitative interviews with investors and financial analysts. The results show that profitability, measured by Return on Assets (ROA), is the strongest financial factor in attracting investor interest. Company size and institutional ownership also have effects, but their impact is smaller. The study also found that investor emotions, such as trust, hope, and fear, play a big role in investment decisions. Companies that show good financial performance, build trust, and share a strong vision for the future are more attractive to investors. This study contributes to the literature by combining financial metrics and investor psychology to better understand what drives investor behavior. It offers practical insights for companies on strengthening investor relations by focusing on financial performance and emotional factors such as trust and future vision.
References
Abbas, Z. F. (2022). Investors' response to the reporting of financial performance indicators: Evidence from Iraq. Akkad Journal of Contemporary Accounting Studies, 1(1), 1–17. https://doi.org/10.55202/ajcas.v1i1.8
Abedin, S. H., Haque, H., Shahjahan, T., & Kabir, M. N. (2022). Institutional ownership and firm performance: Evidence from an emerging economy. Journal of Risk and Financial Management, 15(12), 567. https://doi.org/10.3390/jrfm15120567
Al-Najjar, B. (2008). Corporate governance and institutional ownership: Evidence from Jordan. Corporate Governance: The International Journal of Business in Society, 10(2), 176–190. https://doi.org/10.1108/14720701011035693
Barberis, N., Shleifer, A., & Vishny, R. (2001). A model of investor sentiment. Journal of Financial Economics, 49(3), 307–343. https://doi.org/10.1016/S0304-405X(98)00027-0
Bennett, J. A. (2003). Greener pastures and the impact of dynamic institutional preferences. Review of Financial Studies, 16(4), 1203-1238. https://doi.org/10.1093/rfs/hhg040
Borochin, P., & Yang, J. (2016). The effects of institutional investor objectives on firm valuation and governance. Finance and Economics Discussion Series (FEDS). https://doi.org/10.17016/FEDS.2016.088
Butt, H., Sajjad, A., Awan, K. Z., & Shakil, M. H. (2024). The role of behavioral factors on investment decision making: Moderating role of financial literacy. Pakistan Journal of Humanities and Social Sciences, 11(4). https://doi.org/10.52131/pjhss.2023.v11i4.1876
Creswell, J. W., & Clark, V. L. P. (2018). Designing and conducting mixed methods research (3rd ed.). SAGE Publications.
Diantimala, Y., Syahnur, S., Mulyany, R., & Faisal, F. (2021). Firm size sensitivity on the correlation between financing choice and firm value. Cogent Business & Management, 8(1), 1926404. https://doi.org/10.1080/23311975.2021.1926404
Engler-Palma, A., & Hoag, D. L. (2007). Accounting for risk and stability in technology adoption. Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, 55(3), 417–428. https://doi.org/10.1111/j.1744-7976.2007.00097.x
Erhemjamts, O., & Huang, K. (2019). Institutional ownership horizon, corporate social responsibility, and shareholder value. Journal of Business Research, 105, 61–79. https://doi.org/10.1016/j.jbusres.2019.05.037
Hidayatulloh, I. R., & Trisnaningsih, S. (2024). The impact of company size and profitability on firm value with institutional ownership as a moderating variable. Ilomata International Journal of Tax and Accounting, 5(3), 667-680. https://doi.org/10.61194/ijtc.v5i3.1159
Ho, Y., Tjahjapranata, M., & Yap, C. M. (2006). Size, leverage, concentration, and R&D investment in generating growth opportunities. The Journal of Business, 79(2), 851–876. https://doi.org/10.1086/499140
Jalih, J. H. (2022). The influence of return on equity, company size, and institutional ownership on company value. EPRA International Journal of Economics, Business and Management Studies, 9(2). https://doi.org/10.36713/epra9545
Khan, A. R., Azeem, M., & Sarwar, S. (2017). Impact of overconfidence and loss aversion biases on investment decision: Moderating role of risk perception. International Journal of Transformation in Accounting, Auditing & Taxation, 1(1). https://management.eurekajournals.com/index.php/IJTAAT/article/view/93
Khusnah, Z. M., & Subroto, B. (2024). The effect of company size, profitability, leverage, and institutional ownership on the timeliness of public company financial reporting. Basic and Applied Accounting Research Journal, 4(2), 168-179. https://doi.org/10.11594/baarj.04.02.04
Kurata, A., Listiani, R. A., Agustina, R., & Ariesanti, A. (2022). Does profitability and firm size matter in explaining the value of insurance companies during the pandemic? Jurnal Reksa: Rekayasa Keuangan, Syariah dan Audit, 9(2). https://doi.org/10.12928/jreksa.v9i2.6769
Lam, K., Law, M., & Leung, A. (2022). Investor sentiment and firm profitability: International evidence. Global Finance Journal, 52, 100719. https://doi.org/10.1016/j.gfj.2021.100719
Liu, J., Wu, C., Zheng, W., & Lin, G. (2023). Monitor or manipulator? The effect of institutional ownership on market manipulation. Finance Research Letters, 58(Part B), 104471. https://doi.org/10.1016/j.frl.2023.104471
Mysaka, H., & Derun, I. (2021). Corporate financial performance and Tobin’s Q in dividend and growth investing. Contemporary Economics, 15(3), 276–288. https://doi.org/10.5709/ce.1897-9254.449
Ompusunggu, D. P., & Rahayu, S. (2023). Analisis likuiditas, leverage dan ukuran perusahaan. Jurnal Ekonomi, Bisnis dan Manajemen (EBISMEN), 2(2). https://doi.org/10.58192/ebismen.v2i2.779
Sitorus, T., & Yuganda, K. (2019). Investor’s stock selection decision: Influence of profitability, company size, and RAROC. Copernican Journal of Finance & Accounting, 8(2), 69–84. https://doi.org/10.12775/CJFA.2019.009
Vamossy, D. F. (2020). Investor emotions and earnings announcements. arXiv preprint. https://arxiv.org/abs/2006.13934
Vieira, C. A. M., Xavier, G. C., & Lucena, W. G. L. (2024). Investor sentiment and earnings management: Evidence on the use of discretionary accruals to meet earnings benchmarks. Brazilian Business Review, 21(2). https://doi.org/10.15728/bbr.2022.1207.en
Wulandari, F. A., & Suwarno, S. (2023). How institutional ownership drives financial performance while larger firms struggle. Journal of Economic and Economic Policy, 1(3). https://doi.org/10.61796/ijecep.v1i3.34
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Aulia Busono
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
- Authors retain copyright and grant the JURNAL REKSA right of first publication with the work simultaneously licensed under a Creative Commons Attribution License (CC BY-SA 4.0) that allows others to share (copy and redistribute the material in any medium or format) and adapt (remix, transform, and build upon the material) the work for any purpose, even commercially with an acknowledgment of the work's authorship and initial publication in JURNAL REKSA.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in JURNAL REKSA.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
